UPDATE: It's happened - China has suffered its first domestic corporate bond default as Chaori fails to meet interest payments on schedule and rather more surprisingly failed to receive a last-minute mysterious or otherwise bailout...

*CITIC BANK WON'T HELP CHAORI MAKE INTEREST PAYMENT: 21ST HERALD

*SHANGHAI CHAORI DEFAULTS ON BOND INTEREST PAYMENTS, WSJ SAYS

But hey don't sweat it, Moody's think it's great news...

*MOODY'S: DEFAULT BY CHAORI SOLAR WOULD ADVANCE CHINA'S BOND MKT

Maybe tell the issuers that couldn't get their deals off today!!!

Of course what they mean is - maybe the market will finally start pricing in some real risk...

"Over the past few years, municipal governments and banks in China have stepped in to help distressed companies meet their bond payment obligations. These bailouts have led some investors to overlook the fundamental credit risks in bonds," says Ivan Chung, a Moody's Vice President and Senior Credit Officer.

...

"A default would likely make investors recalibrate their risk-return consideration for onshore bonds. Credit risk would play a more important role in pricing, thereby making the bond market more efficient in the allocation of capital," adds Chung.

As Bank of America reports in an analysis by David Cui, the Trust defaults are about to get hot and heavy. To wit:

We believe that during April to July the market may see many trust products threatening to default, especially those related to coal mines. By our estimate, the first real default most likely could happen in May with a Sichuan lead/zinc trust product worth Rmb140mn. This is because the product is relatively small (so the government may use it as a test case), the underlying asset is not attractive (so little chance of 3rd parties taking it over) and we also have heard very little on parties involved trying to work things out. Whether this will trigger an avalanche of future trust defaults remains to be seen and this presents a key risk to the market in our opinion.

Ever since the specter of the first real domestic default on a Chinese corporate bond hovered over the markets, the Chinese credit markets have been leaking lower. The last 3 days have seen the biggest drop in Chinese credit markets in almost 4 months. That situation, wistfully occurring half way around the world while US equity markets press on to ever more exuberant (and ignorant) heights, meant at least 3 other Chinese firms pulled their bond issues today and, as Reuters reports, has "triggered widespread upheaval in the bond market." Banks are awash with liquidity (as indicated by low repo rates) but clearly unwilling to lend and external investors are now running scared.

The Chinese corporate bond market has suffered considerably in the last few days...

The threat of China's first domestic bond default has prompted Suining Chuanzhong Economic Technology Development to delay a one billion yuan ($164 million) debt issue and two other companies have halted deals blaming market volatility.

...

The run-up in corporate debt since 2008, and overcapacity in sectors such as steel, coal and solar energy, have threatened the solvency of many borrowers.

Chuanzhong said late on Wednesday that the news that Chaori Solar was set to miss a coupon payment on Friday "triggered severe upheaval in the bond market", so it had delayed its bond deal.

Taizhou Kouan Shipbuilding postponed a 300 million yuan issue of short-term commercial paper, while Xining Special Steel cancelled a 470 million yuan offering of medium-term notes, the companies said.

The deals are relatively small, but the delays underline the risk that an unprecedented default will make it harder for other companies to access capital.

This situation is being exacerbated as the lending is being cut to the indistries with the most slack - with the result (as we warned about in the past) that commodity-based collateral for all the shadow loans is getting hammered (through no real demand) and crushing the credit system (through haircuts and forced deleveraging as collateral values collapse)...

This is very negative for the Chinese economy which now more than ever is reliant on credit as its growth-driver... and the China credit-crisis indicator remains flashing red (2Y Swap - 2Y Bond spread)...

"We now turn to the reality on the ground."
Hopefully...this is a brief interruption before we get back to our "regularly scheduled programming" but we shall see.

We just had the Olympics...good place to go back to "in spirit" right now, yes, yes? There has to be a place that carries that "spirit" right now...Vienna is about the only place i can think of that doesn't have anything but "overtones."

"stick history back in the bottle"...yes, yes? "Respect for both sword and shield"? We are all great powers...we all agree on "integrity" here. Now we just have to find it within ourselves to say that we are all "lacking it" at the moment and hopefully get a laugh and hit the "refresh button."

Gotta lot of work to do here.
"The money is already gone."
We need to put that aside right now in my view.

you always crack me the fuck-up...you're like the stephen wright of ZH.

just bend the knee, say the Lord's Prayer, and thank Him you didn't marry a california-girl...well, on second thought, i must concede, there are advantages. chief among them: any california girl, no matter how fundamentally bitter, can, at various times, be lured back into the the girl she was before she became a mother -- but only for brief moments -- and then it's all back again to pestiferous nonsense...as soon as the intoxicants wear off, that is.

every second, every minute, every hour, every day, every week, every month, every year...and, God bless me, every decade...i'm at every mark more convinced that i am not only deserving of a mistress, it has become a matter of absolute necessity. for the sake of my marriage, my children...and, God bless me...my beloved america, i must find a way to afford the one(s) i have in mind, find & seduce her(them), and bribe my wife into accepting the whole arrangement. it's become a matter of national security.

That is what I don't understand about all this doom and gloom. Since everyone can just "print" (read add more zeros into the computers) an infinite amount of money what is the big deal? If anything happens just print more money. Defaulting on debt? print money. Not enough credit? print money. deflation? print money. inflation? print money. economic slowdown? print money. economy expanding too fast? print money. printed too much money? print more money.

you can't go wrong, I mean really, whats the worst that could happen? The numbers get too large? Well in that case just invent new numbers or just put an exponent next to the ones you already have, either way problem solved.

And then UBS, the biggest underwriter of debt since 2010 says that China wants a small default to reduce risks of a bigger default in the future. It makes senses just like China allowed yuan to depreciate the highest in the last 2 weeks.

In a state owned system, nothing is what it seems and nothing seems what it really is....

Xie Ping, deputy general manager at China Investment Corp., the nation’s sovereign wealth fund, said Jan. 11 China’s local governments won’t default and the central government won’t allow them to go insolvent either, Hexun reported on its website.

While a default in shadow banking would help investors better price risk, it would hurt local funding units and property companies that rely on them for capital, according to Ping An Securities Co.

“A default in the trust product will facilitate the healthy development of the market,” said Ping An’s Shi. “If there is a default, the trust market may shrink and those small LGFVS and small property companies which rely on trust financings will be impacted.”

China invades the 'islands', market tanks, say it's not an invasion open to discussion etc, markets rally. Threatens US with UST sells offs and cutting investments o/s, Obama spins around on the spot, the EU sucks it's ass. Japan's balls are tied or if you like "Japan's balls are tired"

It's just tremendous. It reminds me of a time me and a buddy were out at a bar and some chick arrogantly shot down my friend and he was hammered and pissed and called her an "easy titted bitch". It literally made no sense and yet was perfect.

I can almost see the bloomberg interview with Kyle Bass when they ask him what finally took down the JGB market and he says "Japan's balls were tired"

i wonder if this has anything to do with canada's passport thingy? i wonder also how this relates to that mysterious derivatives implode? i ponder further what import this has on the tiered status of various chinese corporate bond ratings?

i don't think this looks good for a domiciled yuan. but, on the upside (and only in the very near-term), it looks great for real estate in hong kong, beijing and shang hai.

If you convert those Yuan to dollars on the bar chart it all comes out to what? $20 billion total? Seems like a relatively small amount to me but then again there's the loss of confidence and the potential for a panic that could spread like wildfire.

one day this whole global ponzi will come screeching to a halt as it collapses under the weight of its own insolvency. today is not that day. but at least we know 1 company on earth's 510M sq.km. missed a payment. not like some tsunami/fukushima event, just missed a payment. back in your coop, chicken little.

i'm going to go out on a limb and say the SPX closes at all time highs in the next 8 hrs... i feel so bold!!

Eric Sprott discusses the Gold market manipulation and the set of evidence presented by a number of new reports on the subject. According to Eric, demand for Gold is exceeding available supply and it will power the Gold price much higher. China is buying record amounts of Gold and situation in Ukraine puts more strain on the global economy and its monetary system. Gold is the place you turn during the financial and political distress.
http://sufiy.blogspot.co.uk/2014/03/eric-sprott-on-ukraine-russia-war.ht...

I'm going to suggest the Chinese default was in punishment for having supported Putin the past few days, and to intimidate the Chinese with financial devastation. If the Chinese are smart, they will continue their hard work in dethroning the Oligarchs and restore some sanity to the world. After that, we can worry about bonds and defaults. Until the global intrigue is resolved, consider financial events as political attacks and allegiances.

Anybody dumb enough to hold Chinese bonds is gonna be missing a lot more than just a coupon payment. You can kiss your principal goodbye, since the entire Chinese financial system right now is more or less the world's largest ever Ponzi scheme.

Copper-based letters of credit, Bankers' Acceptance Notes, whatever... there is a whole lot of funny money floating around in China, and when people start to find out that funny money can't be used to repay real debt then things start to get unfunny very, very rapidly.